Main Index Pablo Honey The Bends OK Computer Kid A Amnesiac Hail to the Thief In Rainbows The King of Limbs A Moon Shaped Pool Thom Yorke Jonny Greenwood Ed O'Brien Colin Greenwood Philip Selway
'(Nice Dream)' was written in 1992. Ed has remembered Thom playing him a cassette with a demo version of the song in the car in late 1992.
Thom and Jonny premiered the song acoustically on february 11th 1993 at Studio Café, Disley, UK for Signal Radio:

A studio demo was recorded at Courtyard Studios in march 1993 during the same session that also produced the released version of 'High & Dry'. It became available on the Radiotick bootleg along with studio demos of 'Banana Co.', 'Pop Is Dead' and 'The Bends'. The band officially released a proper mix of this studio demo on the compilation Sharks Patrol These Waters Vol 13. But this is the mix from the bootleg:
The lyrics had progressed considerably by the time the song made a few appearances in the band's sets in late 1993 towards the end of touring for Pablo Honey, only the first verse remains unfinished at this point. The full band premiere probably took place on september 3rd 1993. The band included new songs like `Killer Cars', 'Banana Co.' or this one in their sets to add some excitement to the dread of feeling like a human jukebox onstage and also to shape the new material.
In this particular version from December 9th 1993, which was picked for its relatively good sound quality, Thom slightly messes up the lyrics in the first verse, singing "confusion" instead of "persuasion" and "illusion" instead of "confusion". Given below are lyrics that match all the other available versions from late 1993:
you're on my own desert island
i am wrecked by your persuasion
you build me my very own garden
give me sunshine and confusion

nice dream, nice dream, nice dream

i call up my friend, the good angel
but she's out with her answerphone
she says that she'd love to come help but
the sea would electrocute us all

nice dream, nice dream, nice dream
nice dream, nice dream, nice dream
nice dream

if you think that you're strong enough
if you think you belong enough
if you think that you're strong enough
if you think you belong enough

nice dream, nice dream, nice dream
nice dream
The performance from February 21st 1994 still had the very same lyrics and arrangement as posted above, so that the live versions from late 1993/early 1994 give insight into how '(Nice Dream)' sounded in rehearsal in the winter of 1993/1994 when the band started work on what was to become The Bends:
When sessions started in March 1994 at RAK Studios in London, '(Nice Dream)' was one of four songs that were to be recorded first and which all were possible candidates for the next single. The other three were 'Sulk', 'The bends' and 'Killer Cars'. None of these fours songs would be singles in the end, and the sessions proved to be difficult and mostly unfruitful.

During these sessions Thom answered a fan letter by Robert Jonas, who provided it for use in this website. It's dated March 23rd 1994 and Thom mentions working on '(Nice Dream)' at RAK:

(click to enlarge)
A rough mix of '(Nice Dream)' was included on this august 1994 work-in-progress tape compilation. The handwriting is Thom's. Side A of the cassette appears to contain both finished versions as well as a few rough mixes and also lists some working titles:

The comment "not finished" next to '(Nice Dream)' may refer to the missing strings, which would be recorded in november 1994 at Abbey Road Studios.
Phil: Nice song!

Ed - I remember when Thom first played the song to me on tape, just him and the acoustic. We were in my car and I had to rewind and play the song about ten times. We were supporting Kingmaker at the time at the end of 1992.

Jonny - A D D E A D D E Bm E A Aninth flat fifth A Aninth flat fifth A Bm E A B Bm B A.

Colin - Dreamy antithesis of 'Bones', it also features Leckie's 'whale songs' at end.

Thom - I don't remember my dreams. But this is one that won't go away.
Thom: "We all debuted playing acoustic guitar on this in a sort of cosmic Kumbaya outside the studio. There's this awful photograph of us all sitting on a lawn with headphones on. The lyrics came out of a half-drunk dream I had, one of those where you don't really sleep properly. It's about our relationship with people generally."
'Nice Dream', for example, was originally a simple four-chord Yorke composition, but Greenwood and O'Brien added more parts, including the intro, while the music to the propulsive 'Just' was largely written by Greenwood, who Yorke says "was trying to get as many chords as he could into a song. It was like writing a medley."
Following his return to his basement flat in Oxford, one evening saw Yorke falling into "a sort of drunken coma and singing a song which became '[Nice Dream]'. That song refers to a story by Kurt Vonnegut where this crystal's been found that turns all water completely solid and someone drops it into the sea. If you want to kill yourself you just put your finger into the water."
'(Nice Dream)' was regularly played during the tours for The Bends and OK Computer. After the band had performed it occasionally during the Kid A period it made its last appearences in setlists of a handful of Hail to the Thief shows.
  Kid A tour june 2000 july 2000 september 2000 october 2000
The Bends [14] 01 02 07 12 15 19 23 25 29 02 06 08 11 17
Bones [19] 13 15 17 18 19 21 22 25 26 27 30 01 07 01 07 11 12 28 08
(Nice Dream) [7] 13 25 27 04 07 15 20
Bullet Proof..I Wish I Was [3] 19 22 08
'(Nice Dream)' was not played live during the Amnesiac tour in 2001.
  Hail to the Thief tour (1st half) may 2003 june 2003 july 2003 august 2003
The Bends [3] 08 12 21
Bones [4] 07 08 14 03
(Nice Dream) [1] 18
Bullet Proof..I Wish I Was [1] 24
  Hail to the Thief tour (2nd half) sept. 2003 october 2003 november 2003 dec. 2003 april/may 2004
The Bends [8] 11 19 22 23 27 29 01 04
(Nice Dream) [2] 15 24
Bullet Proof..I Wish I Was [1] 18
  In Rainbows tour (2nd half) august 2008 october 2008 march 2009 august 2009
The Bends [9] 01 09 12 13 25 28 01 16 23
(Nice Dream) [3] 21 23 29
Bullet Proof..I Wish I Was [1] 08